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Strategy Dynamics focuses on performance over time. The ultimate concern of strategic management is to
quantitatively improve performance through time, sustainably. This can apply to the enterprise as a whole, or
for a key function of interest [e.g. sales]. This means answering some challenging questions:
The chart shows how these questions might look for Starbucks in 2008.
The trajectory that performance is following at any time depends, strongly and unavoidably, on what has
occurred over the organization's history. The method therefore starts from a time-chart of the organization's
performance over its relevant history, and into the future, as measured by one or more conventional indicators
[e.g. revenue or profits].
HOW IS IT USED?
Starting from the view of looking at how performance is changing over time, the method works logically
through three stages. (Click each for more info)
Step 2. Identify the flows that cause these resources to 'fill and drain'
Step 3. Identify the factors that cause resources to be won and lost
When combined, the principles create an integrated diagram that depicts the 'physics' of the system, known as
the 'strategic architecture' and how this system determines performance through time. These pictures are very
similar to the flow-charts found in chemical process plants or power-transmission systems, for example. These
display not only a diagram of the system, but also where material or objects are located, how quickly they are
moving and what human controls are acting on to make the system perform as we want.
Once this core architecture is complete, whether for a business, a part of a business, or any other organization,
additional factors can be added by extending the same principles. These include:
The three stages outlined above (identify resources -> identify flows -> identify the causes of in- and out-flows
to the resources) apply far more widely than to businesses or other organizations. They explain how many
kinds of situation behave over time - in ecology, economics, biology, and so on.
What strategy dynamics does is focus on them primarily in business contexts, although governmental and non-
profit issues can also benefit - recent examples we have worked on being Quality of Life indicators in
London (Video: 33 mins) and cross-border trade in a developing country (Video: 8 mins).
Business is one of the largest and most valuable domains where system dynamics can make a big impact. This
is because the most important business challenges are about how to improve performance over time AND
System Dynamics can
So: "Strategy Dynamics" is simply a translation of system dynamics into business, in terms business people
can understand and exploit.
Strategy dynamics also differs from 'Systems Thinking' approaches [Peter Senge, 1990, The Fifth Discipline,
Doubleday] in emphasizing resource-accumulation and the importance of quantifying change-through-time, in
contrast to the qualitative, feedback orientation of systems thinking.
For more on the theory of the method see the Wikipedia page on strategy dynamics.
These benefits do not come for free, however. The method takes time and effort, but not excessively so, given
the value that can be had from improved strategies and decisions. There are significant limits to the reliable
measurement of some items that limit the certainty the method can offer, e.g. measures for reputation or
capability, and to some important causal relationships, e.g. to what extent reputation influences the rate of
customer acquisition.
To have the greatest impact, the method needs extensive factual evidence, including history, about many
aspects of the enterprise and its performance. Frequently, these key numbers are unknown, in which case the
team must be prepared to exercise its judgment in estimating what those missing values might be, and what
impact they may have. The approach also depends on management's willingness and ability to be quantitative
in their decision-making, which not all cultures find easy.
A simple business plan for a manufacturing company video here and model here
A new product launch model model here
A public-company model (Ryanair PLC) model here